Why did Asteelflash acquire EN ElectronicNetwork?

We talked to Gilles Benhamou, President and CEO of Asteelflash, about the recent acquisition of EN ElectronicNetwork and how it fits with company strategy. Most importantly, why now?

On Monday, Asteelflash announced the acquisition of EN ElectronicNetwork, Germany’s number two EMS provider. It's a reasonably big purchase; the company's revenue reached 181 million USD in 2011 and has staple of 700 employees.

The acquisition seems to follow a strategy of recent expansion for Asteelflash, which earlier this year purchased facilities in the U.S and Mexico. Given an economic climate that is currently less than friendly to EMS providers, why is Asteelflash expanding its footprint?

“The strategy is not tied with one day or one point in the economy. We are more on the long term strategy,” answers Benhamou over the telephone. “Our strategy is to be one of the first European EMS companies”.

Of course this strategy puts the company out of step with other EMS providers, particularly as they have expanded in high-cost regions.

“Everybody tries to close their factory(s) in high cost countries. We do the inverse. We buy and want to develop,” says Benhamou. “To be competitive you have to reach a strategic size and we want to be, not as Foxconn, but we are able to have the right size to give competitivity to our customer”.

With centers in areas such as Romania through Germany, in Tunisia, in Mexico and China, Benhamou says the company now has a global footprint to support the customer. “Now it’s how we can support more and more and give more service. It’s really our challenge for the next two years”.

The investment in Germany completes this footprint. “Independent of the economy at the moment , it is very important to be present in ... three countries (France, UK and Germany) and Germany would be able to also to have a link with Nordic Europe. France - it is possible to have a relationship with the South European customer and UK is Northern Ireland”.

Proximity to customers, in order to provide high-quality service, is a key part of Asteelflash's focus for the future. Benhamou says the company wants to have engineers at least as close as 300 kilometres to customers. This goes someway to explaining why Asteelflash continues to invest in high-cost regions, rather than doubling down on low-cost locations.

“We are able to be competitive against anybody by low cost, but a company able to give a global footprint and able to form a relationship with each customer - there are not a lot on a global view worldwide. So that’s a key to our strategy and it is why we invest more,” Benhamou says.

"What is very useful, and where we can create value, is to rely on contact with each customer in each country and to support them as is possible on that development.”

All of this is good news for employees in Germany who, if Benhamou's words are correct, can expect support from the Asteelflash network. Something Benhamou is adamant about.

“In Germany, clearly our strategy is to develop the site there and develop the customers with them. We are able to give the customer a global footprint in Germany. In our strategy we will not close the site in Germany. Even in the next three years we think we can double our revenue with the German customer. If we do that we will even create employment in Germany”.

So can we expect further expansion from Asteelflash?

“We are present in the key markets of the world...,” says Benhamou. “So we don’t have a strategy now to increase our footprint network. It’s enough. Now it’s more to improve our relationships with the customer and give them the right service. For the next two years (we have) no Euro project to take a new company in the group, that’s not now on our strategy”.